A new bill introduced to Congress aims to ban hedge funds and institutional investors from buying single-family rentals.
If passed, the "End Hedge Fund Control of American Homes Act” would force large investors to sell all single-family homes they own within 10 years, enforced by hefty tax penalties for non-compliance.
Despite the title, the bill targets all entities with $50 million or more in net value or assets under management, which includes real estate investment trusts (REITs) and corporations such as BlackRock and Invitation Homes.
"The housing in our neighborhoods should be homes for people, not profit centers for Wall Street," Senator Jeff Merkley, D-Ore., co-author of the bill, said in a press release. “Yet, in every corner of the country, giant financial corporations are buying up housing and driving up both rents and home prices.”
The press release cites an Urban Institute report which reveals that institutional ownership in single-family rentals was 3.8% in June 2022, with the overwhelming majority of homes owned by small and medium investors.
Reactions to the bill are mixed, with some questioning how significant a threat such a small percentage of investors truly is to housing affordability, and suggesting the need to focus on construction instead.
But advocates argue the ban could level the playing field for aspiring homeowners and first-time investors – and smaller property managers, who could step in as institutional in-house property management staff exit.
The “End Hedge Fund Control of American Homes Act” will face challenges passing into law due to a divided Congress, leaving the potential impact on the housing market and broader economy open to speculation.
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